Bankia has confirmed that it plans to seek the largest government bailout of a Spanish bank to date. The move had been widely expected but the sum requested was much higher than had been feared.
The troubled Spanish bank Bankia has confirmed that it is seeking a further 19 billion euros ($23.8 billion) in state aid as part of its restructuring plan.
“This plan has identified capital needs of 19 billion euros which will be entirely covered by the state," the bank said in a statement. It added that it had drawn up the plan in coordination with both the government and the Bank of Spain.
This comes in addition to the 4.5 billion euros that Madrid has already pumped into the lender and would make it the biggest ever bailout of a Spanish bank.
The sum requested is significantly larger than the 15 billion the bank had widely been expected to ask for.
Amid the speculation about just how deep the Spanish government would be asked to dig to bail out the country's fourth-largest bank, the Madrid stock market had suspended trading in Bankia's shares earlier in the day.
The price of its shares had plummeted by more than seven percent during Thursday's session. Bankia's shares have lost 58 percent of their value since they were listed in July of 2011. The bank was created through the merger of seven struggling regional lenders in 2010.
Toxic real estate assets
The bank, which was partially nationalized earlier this month, has been crippled in part by its exposure to the troubled property sector. Bankia holds an estimated 32 billion euros in toxic real estate assets.
Bankia received a further blow on Friday when the US-based ratings agency Standard & Poors lowered its credit rating, along with those of five other Spanish lenders to junk level, from BB+ from BBB-.
"The rating actions follow our review of the wider implications for economic and industry risks in the Spanish banking sector after our two-notch downgrade of the Kingdom of Spain," the statement said, referring to its reduction of its rating of Spanish sovereign debt last month.
pfd/ccp (dpa, AFP)
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